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What is the mortgage underwriting process in the UK?

Sep 03, 2024
House buying jargon explained

 Mortgage underwriting plays a crucial role in the UK mortgage process. It’s when professionals examine your eligibility for a mortgage by considering your financial circumstances, age and credit score.

Whether you’re considering buying a home or have already kickstarted your journey, our guide provides all the key information about mortgage underwriting.

Key Takeaways

  • Mortgage underwriting is a crucial stage in the UK mortgage process.
  • It involves assessing your risk as a borrower before offering you a mortgage.
  • A professional underwriter reviews your application and financial details.
Underwriter’s Role:
  • The mortgage underwriter evaluates whether you can afford the monthly repayments.
  • They assess the property’s value relative to the purchase price.
  • Your application must be completed accurately and in detail.
Factors Considered by Underwriters:
  • Income and Expenses: Underwriters verify your income and regular expenses.
  • Debts: Existing debts impact your ability to make mortgage payments.
  • Age: The mortgage term should align with your expected retirement age.
  • Credit Report: A good credit history makes you less risky to lenders.
  • Personal Circumstances: Factors like dependents and job stability matter.
  • Property Details: The home you’re buying is also evaluated.
 

What is mortgage underwriting?

Mortgage underwriting involves thorough checks by a lender to assess whether you and the home you intend to purchase represent an acceptable risk. While you may have passed initial soft checks through the agreement in principle , mortgage underwriting delves deeper into your financial and personal circumstances.
 

What does the mortgage underwriter do?

The lender employs a mortgage underwriter to review your mortgage application. They determine whether you can afford the monthly repayments and if the home’s value aligns with your purchase price. To do this, they review your financial information, including income, expenses, debts and other personal circumstances.
 
You can’t get a mortgage unless the underwriter is happy with the level of risk. Your application will be compared against your financial history – discrepancies may impact the mortgage decision.
 

What do mortgage underwriters check?

Mortgage underwriters check various factors to determine loan eligibility. Specific criteria vary depending on the lender, but they typically include the following.  
 

1. Your income and expenses

Lenders will assess your ability to afford mortgage repayments by examining your income and expenses. They’ll look at your bank statements to verify consistent income and identify any financial concerns. 
 
If you’re self-employed, you must provide a Self Assessment Tax Calculation (SA302) form plus business and personal bank statements from the previous three months.
 

2. Your debts

As part of their affordability checks, lenders will want to know about any existing debts. This is because repaying debts could potentially affect your ability to make mortgage payments.
 

3. Your age

Given that mortgage terms often span decades, the underwriter assesses your age to check if the term will run beyond your expected retirement age. By doing so, they verify that repayments will remain affordable in the future. There’s no standard age limit  for getting a mortgage. Most lenders set their age limits, often ranging from 65 to 80, and some offer later-life mortgages, which include retirement years.
 

4. Your credit report

Lenders will want to assess your credit report, as it reveals whether you’ve previously missed payments or defaulted on debts. A positive credit report enhances your appeal to mortgage lenders by reducing perceived risk. They’ll either use one of three credit referencing agencies to check your credit score – Experian, Equifax and TransUnion – or their credit referencing model.
 

5. Your circumstances

Underwriters may also consider factors such as dependent children, job stability, and future earning potential.
 

6. The property

The underwriter will want to know about the home you’re interested in buying. Although the property valuation report is separate from the underwriting process, the underwriter will consider it as part of their decision-making.
 

Do all mortgage lenders use underwriters?

The majority of mortgage lenders use underwriters to assess loan applications. They consider it essential to verify that borrowers are low-risk and capable of keeping up with their repayments.
 
However, some lenders may directly underwrite mortgages themselves. Others will refer to them for complex applications, such as those from borrowers with bad credit.

 

How long does mortgage underwriting take?

The time it takes to make mortgage decisions varies. Simple cases can be resolved in just a few working days, while complex situations may extend the process to several weeks. Additionally, if the lender is handling a large volume of applications, the timeline could be further extended.
 
 

What should I do if a mortgage underwriter rejects my application?

Experiencing rejection during the underwriting stage can be disheartening. However, this setback doesn’t mark the end of your mortgage application journey.
 
To improve your chances in future applications, identify the specific reason behind the rejection. Speaking with a mortgage broker  can be helpful at this point. They can directly communicate with the underwriter, pinpoint the issue and guide you toward a more successful application next time.
 

Does a declined mortgage affect credit score?

If your mortgage application is declined, it won’t directly impact your credit score. The application will appear on your credit report without indicating whether it was accepted or rejected.
 
Keep in mind that subsequent mortgage applications may result in hard credit checks, which can negatively affect your credit score if done frequently. 
 
Ready to become a homeowner? Discover our brand-new homes across the UK, including 3 bedroom and 4 bedroom homes.
 
We also have fantastic offers to help you through the homebuying process, such as Part Exchange, Parent Power and Deposit Boost. 
 
Call our Sales Advisers today to get started.
 

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